auditqualitymatters

Where independence threats are other than clearly insignificant, safeguards need to be applied, or the action/relationship at issue should not be undertaken. Some of these safeguards are created by the profession, by legislation or by regulation. Others are created in the work environment, either by the organisation or the individual.

There are also a number of general prohibitions contained in Directive 2 of the Accountancy Profession Act and also in the Companies Act, such as accepting gifts or hospitality from an audit client, familial and personal relationships and close business relationship with the audit client, amongst others. These threats to independence cannot be mitigated by safeguards and outright prohibition is mandatory.

Compass approach

An independence review includes:

• An appraisal of whether the practice’s procedures comply with ISQC 1,ISAs, IFAC Code of Ethics and applicable laws and regulations.
• The involvement of the auditor by expressing his views on the issues raised.
• A presentation on identified issues.
• A report recommending agreed courses of action for improvements.
• Suggested manuals, checklists and appropriate audit programmes that may be introduced at the practice (at an extra charge if the implementation of these tools is onerous).

^{Renzo Farrugia is recognised by the Malta Institute of Accountants to provide audit support services.}